Find below a new report from Jeremy Grantham’s GMO on a Chinese shadow banking credit bubble. It is clear and easy to follow but not for the faint of heart.
GMO: China’s shadow credit bubble
Posted by Houses and Holes in China Economy, Featured Article on January 23, 2013 | 4 comments
High quality bear porn
Not directly related but out the same end of the pitch is the sentiment on this piece about Chinese officials dumping property in China (in order to be away quick)
http://www.telegraph.co.uk/news/worldnews/asia/china/9815998/Chinas-Communist-party-cadres-launch-property-fire-sale.html
I’m surprised by the general disinterest
Long week end effect perhapse
Hang on.
2d tells me that China is some kind of perfect ‘command’ economy in which they can do no wrong & the power brokers can bend the system at will to fix all problems (or simply throw large amounts of money to fix the problem). Thus, he asserts a river of gold will flow from China into Australia for decades to come.
Anyway, the cracks are most definitely appearing in our large trading partner’s 8 – 9% growth per year meme:
- huge credit bubble
- real estate seeing huge falls outside of fudged government stats (85% in those dodgy desert dwellings – you know, the places that are a movie set in ‘Dune’)
- massive shadow banking system investing in dodgy assets with dodgy rate’s mates of return that suck capital out of the (less) suspect government banking system
- short term borrowing is going long on dodgy wealth investment vehicles that appear to be junk assets writ large
- declining debt productivity (signals the death knell of strong economic growth in the longer term until that debt is purged)
- Ponzi financing is rife i.e. income from assets are nowhere near paying off principal & interest. It’s all ‘capital growth baby!’ What could possibly go wrong?
- Moral hazard abounds backed by government guarantees
- The cockroaches have been fleeing China in droves with ill-gotten assets
- Huge sums of stimulus money since the GFC period have gone into rubbish investments with no consideration of long term returns
- The huge outflow of capital in the almost $300 billion mark should tell you everything you need to know about the corrupt nature of 2d’s ‘perfect system’ in China that isn’t quite following the fairy-tale script that we are fed on a constant basis
Where is Senior Muppet to put GMO’s report to the sword? Perhaps he couldn’t Google an appropriate reply?